Market analysts are expressing concerns that participants in the cryptocurrency space may not fully grasp how assertive the US Federal Reserve is likely to be in altering its monetary policy. Economist Timothy Peterson highlighted this viewpoint, asserting that the markets are “underpricing” the chance of swift rate cuts by the Fed in the upcoming months.
Peterson emphasized that there has never been a gradual reduction in interest rates similar to what the Federal Reserve has currently indicated. He anticipates that a sudden shift, referred to as “the surprise effect,” could catch market investors off guard. Such a change, according to him, could significantly boost the prices of Bitcoin and altcoins within a timeframe of three to nine months.
These insights come shortly after the Fed executed its first rate cut of 2025 on September 17, reducing rates by 25 basis points. This cut had been widely expected; ahead of the announcement, the CME FedWatch Tool indicated a 96% likelihood of a quarter-point reduction, with only a 4% chance of a more drastic 50-point cut.
In the wake of the recent rate cut, Bitcoin (BTC) experienced a brief surge to $117,000 just hours before the announcement but later settled back to around $115,570, according to CoinMarketCap. Over the past month, Bitcoin has seen a slight increase of 1.03%, reflecting market fluctuations.
Looking ahead, CME data reveals that market participants are now anticipating a 91.9% probability of another 25 basis point cut during the Federal Reserve’s scheduled meeting on October 29, with an 8.1% chance that rates would remain unchanged.
While Fed officials have indicated they expect to implement two additional quarter-point cuts this year, Chair Jerome Powell has stated, “We’re not on a pre-set path,” leaving some uncertainty about future decisions.
Opinions among financial institutions regarding the Fed’s recent move were varied. Some, such as Standard Chartered, predicted a more aggressive 50 basis point cut at the September meeting. In contrast, Goldman Sachs CEO David Solomon expressed confidence that the Fed would opt for a more conservative 25 basis point reduction.
Historically, lower interest rates tend to favor risk-on assets, which include cryptocurrencies, as traditional investments like bonds and term deposits become less appealing to investors seeking higher returns.
